The provisions of section 10(35) of the Income Tax Act exempts income received from the specified units. The exemption provisions of section 10(35) are taken up and explained in the current article.

Exemption provisions of section 10(35) of Income Tax Act

The provisions of section 10(35) offer exemption towards the following-

1. Any income arising in respect of the units of the specified mutual fund; or

2. Any income arising in respect of the units from the Administrator of the specified undertaking; or

3. Any income arising in respect of the units from the specified company.

Thus, in case the income falls within the criteria mentioned above, the entire income arising from such a unit is exempted under section 10(35) of the Income Tax Act.

tax exempt word on yellow notepaper with cork background

Meaning of the term ‘mutual fund’; ‘administrator’ and ‘specified company’-

1. Mutual fund means units specified under section 10(23D) of the Income Tax Act.

2. Administrator means the Administrator, as referred under section 2(a) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.

3. Specified company means the company as referred under section 2(h) of the Unit Trust of India (Transfer of the Undertaking and Repeal) Act, 2002.

It is very important to note here that exemption under section 10(35) of the Income Tax Act shall not be available to income arising in respect of units received on or after 1st April 2020.

Cases under which provisions of section 10(35) doesn’t apply-

The proviso to section 10(35) states that exemption provision doesn’t apply-

1. In case of the income arising on the transfer of the mutual fund; or

2. In case of the income arising on the transfer of the units of the Administrator; or

3. In case of the income arising on the transfer of the specified company.

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

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